The local mining industry has weathered the Covid-19 pandemic better than other sectors, according to the PwC mining report released on Tuesday.
- The mining industry weathered the Covid-19 storm better than other sectors of the economy.
- Stronger commodity prices and the weaker rand supported the financial performance of companies.
- Local mining registered a 44% decrease in production during hard lockdown in April.
The local mining industry has weathered the Covid-19 pandemic better than other sectors, according to a mining report released on Tuesday which highlighted the bullish impact of stronger commodity prices and a weaker rand on the key sector.
According to the 2020 PwC SA Mine report, the favourable market conditions pushed the total market capitalisation of companies by 52% to R1.2 trillion, cushioning the sector from the devastating impact of the global pandemic which affected other sectors.
Although local mining houses operated at lower capacity as a result of the national lockdown, the platinum basket price rally supported growth as gold reached record highs in the early months of the years, with investors turning to the metal amid Covid-19 jitters and global trade tensions.
The gold price has gained 14.9% in 6-months, currently trading at $1910.64, while platinum was 18.6% up, in the same period.
The total revenue generated by the South African mining industry for the year ended 30 June 2020 grew by 4%. This was mainly driven by Platinum Group Metals (PGMs), gold and iron ore, which saw increases in revenue for the 12-month period, the report said.
“The mining industry weathered the Covid-19 storm, mostly unscathed, and certainly better than many other sectors,” according to the report.
PGMs generated the largest portion of revenue at 28%, in what is a 56% increase from the previous year, overtaking coal for the first time since 2010.
“The long-term future is unknown however as there is little consensus on how the pandemic will impact the mining industry. The pandemic highlighted the absolute need to build back better and Mining will play a key role in that recovery,” said Andries Rossouw, PwC Africa Energy Utilities and Resources Leader.
Mining production decreased by 8% year-on-year with a 44% decrease in production noted in April, when the country was under hard lockdown, which saw mines put under care and maintenance with key operation only functioning at reduced capacity.
As a results, there was a 44% dip in production in April 2020 as a result of the pandemic, with the most significant reduction seen in gold, diamonds and PGM outputs.
Rossouw said the country’s mining sector “continues to be a meaningful contributor to the economy and has weathered the Covid-19 pandemic in many respects, showing good profitability and retaining strong balance sheets.”
Mining companies are currently ramping up production to full capacity, following the gradual easing of lockdown regulations by government. While some shafts have returned to full production levels, others such as Amplats have previously reported that they expect to return to near full capacity by the end of the year.